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"When we look at the top 10 percentile of overall performers in our Modern Wealth Index, there’s a consistent theme that they’re diligent planners—three in four say they have a written financial plan"

SAN FRANCISCO--(BUSINESS WIRE)--New research from Charles
Schwab shows that three in five Americans live paycheck to paycheck
and that only one in four have a written financial plan, but those who
do exhibit positive investing and saving behavior.

A thousand Americans participated in Schwab’s 2018 Modern
Wealth Index, an assessment that scores participants between 1-100
based on how well they manage their money and investments across four
factors: 1) goal setting and financial planning, 2) saving and
investing, 3) staying on track, and 4) confidence in reaching financial
goals.

The index reveals that having a written financial plan can lead to
better daily money behaviors. “Planners” are more likely to have a
higher overall Modern Wealth Index score, be regular savers, and
effectively manage their debt:

Planners

Non-Planners

All

Average Modern Wealth Index score

68

44

50

Pay bills and still save each month

75%

33%

43%

Have an emergency fund

65%

24%

35%

Have life insurance

62%

39%

45%

Feel financially stable

62%

32%

40%

Never carry a credit card balance and make other loan payments on
time, or have no debt

42%

26%

30%

Live paycheck to paycheck

38%

68%

60%

“When we look at the top 10 percentile of overall performers in our
Modern Wealth Index, there’s a consistent theme that they’re diligent
planners—three in four say they have a written financial plan,” said Terri
Kallsen, executive vice president and head of Schwab Investor
Services. “Planning is critical to achieving any goal. It’s like
establishing an exercise regimen to get in shape—we need to take the
same approach to keep our finances in good health and on track.”

When it comes to investing behavior, these planners are more likely to
stay engaged with their investments, be aware of the fees they are
paying, and have confidence about reaching their goals:

Planners*

Non-planners*

All*

Consider risk tolerance when investing

82%

55%

65%

Aware of fees and investment costs

78%

44%

56%

Regularly rebalance portfolio

72%

31%

46%

Feel ‘very confident’ about reaching financial goals

54%

17%

30%

Measure progress against goals instead of performance

47%

41%

43%

Have a diversified portfolio

22%

8%

13%

*Among 2018 Modern Wealth Index participants who say they have an
investment account

Roadblocks to planning: Not enough, not for me

Among those without a written plan, 45 percent say it’s because they
don’t think they have enough money to merit a formal plan—the top
roadblock according to Schwab’s study. Twenty percent say getting a
financial plan simply never occurred to them, and another 20 percent say
they wouldn’t know how to go about getting a plan.

“The idea that financial planning and wealth management are just for
millionaires is one of the biggest misconceptions among Americans, and
one of the most damaging,” said Joe Vietri, senior vice president and
head of Schwab’s retail branch network.

“Whether people think they don’t have enough money, believe it would be
too expensive, or just find the whole concept too complicated, the
longer they wait the harder it is to achieve long-term success. We must
make planning and advice more accessible to more people. Simply put, we
believe every American deserves a financial plan, regardless of how much
money they have today.”

“There’s no reason for financial planning to seem so difficult. Outside
of financial services, there are so many examples of things that used to
be burdensome or inaccessible now being much easier,” Vietri added.
“When people think about creating a financial plan, they envision long,
uncomfortable meetings in a stuffy office. At Schwab, we’re making
planning more accessible by lowering costs, simplifying the experience,
offering digitized plans that make it easier to engage in real time, and
having conversations that ignite people’s passions rather than boring
them with tedious charts and numbers.”

Vietri noted that Schwab held more than 140,000 planning conversations
with clients in 2017, a number that has been steadily rising, as have
assets in Schwab’s advisory solutions which are growing faster than
client assets overall, and are up 18 percent year-over-year to $273
billion as of March 31, 2018. Assets in Schwab’s digital advisory
services including Schwab
Intelligent Advisory and Schwab
Intelligent Portfolios are more than $30 billion, as of March 31,
2018.

Leading the way: Millennials outpace older generations in planning

According to the Modern Wealth Index, millennials are in many cases more
focused on saving, investing and financial planning than older
generations:

Thirty-one percent have a written financial plan compared to 20
percent of Gen X and 22 percent of Boomers

Millennials are almost as likely as Boomers to work with a financial
advisor (22% and 25%, respectively) while Gen X lags (16%)

Sixty-four percent of millennials believe they will become wealthy in
their lifetime

“What we see with younger investors is they aren’t just saving and
investing for retirement, which has been the primary focus of previous
generations,” noted Vietri. “They know they need to save for longer-term
goals, but they also save and invest to fund near-term passions like
travel and life experiences. This focus on nurturing themselves as they
age might be one explanation of why they are so engaged with their
money. Interestingly, millennials are also the least likely generation
in our survey to think the amount of money they have doesn’t merit a
plan. We can all learn something from them.”

Modern wealth: It’s not all about money

In addition to assessing how Americans are investing, Schwab asked
people to think about personal definitions of wealth in their lives, and
the survey revealed a wide range of perspectives. When asked for their
personal definition of wealth, two of the top three most popular
descriptors aren’t about money at all:

Living stress-free/peace of mind (28 percent)

Being able to afford anything I want (18 percent)

Loving relationships with my family and friends (17 percent)

According to Schwab’s survey, nearly half of Americans (49 percent)
believe saving and investing is the way to achieve wealth over time. But
in the short-term, they say that other things make them feel wealthy in
their day-to-day lives:

Spending time with family (62 percent)

Having time to myself (55 percent)

Owning a home (49 percent)

Eating out or having meals delivered (41 percent)

Subscription services like movie/TV and music streaming (33 percent)

Other things that make people feel wealthy in their daily lives include
owning the latest tech gadgets (27 percent), having a gym membership or
personal trainer (17 percent), and using a home cleaning service (12
percent).

When asked to focus just on numbers, survey respondents believe it takes
$1.4 million to be considered financially comfortable. To be considered
truly “wealthy,” that number increases to $2.4 million.

The Modern
Wealth Index, developed in partnership with Koski Research and the
Schwab Center for Financial Research, is based on Schwab’s Investing
Principles and composed of over 50 financial behaviors and
attitudes. Each behavior or attitude is assigned a varying amount of
points depending on its importance, out of a total of 100 possible
points.

The online survey was conducted by Koski Research from January 12 to
January 19, 2018, among 1,000 Americans aged 21 to 75. Quotas were set
so that the sample is as demographically representative as possible. The
margin of error for the total survey sample is three percentage points.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help
individuals create a better tomorrow. We have a history of challenging
the status quo in our industry, innovating in ways that benefit
investors and the advisors and employers who serve them, and championing
our clients’ goals with passion and integrity. More information is
available at www.aboutschwab.com.
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Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation
(NYSE: SCHW) provides a full range of securities brokerage, banking,
money management and financial advisory services to individual investors
and independent investment advisors. Its broker-dealer subsidiary,
Charles Schwab & Co., Inc. (member SIPC,
www.sipc.org),
and affiliates offer a complete range of investment services and
products including an extensive selection of mutual funds; financial
planning and investment advice; retirement plan and equity compensation
plan services; compliance and trade monitoring solutions; referrals to
independent fee-based investment advisors; and custodial, operational
and trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles Schwab
Bank (member FDIC and an Equal Housing Lender), provides banking and
lending services and products. Koski Research is not affiliated with the
Charles Schwab Corporation or its affiliates. More information is
available at www.schwab.com
and www.aboutschwab.com.